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What I’ll Tell You
• Define office products• Manufacturing• Office products sales channels• Customers they each serve• Channel capabilities• Logistical challenges• Musings on supply chains in general• Review• Questions
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- Milton BerleAmerican comedian
“You can lead a man to Congress, but you can't make him think. ”
Food for Thought
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“Office Products”
• Core office supplies– Paper, pads, envelopes, etc.– Writing instruments– Filing supplies– Office & desk accessories– Presentation and planning
• Non-computer machines• Computer hardware & software
– Cell phones & tablets• Copy & print• Furniture• Jan/San (Janitorial / Sanitation)• Breakroom supplies• School supplies• Medical supplies
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Office Products
Source: SHOPA School and Office Products Industry Report - 2007
Basic school/office supplies37%
Non‐computer machines
24%
Computers28%
Office furniture7% Other
4%
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Office Products
Source: Staples Annual Report - 2013
Core office supplies28.5%
Ink and toner20.9%
Business technology15.7%
Paper9.0%
Facilities & breakroom7.1%
Computers and mobility7.1%
Services5.8%
Office furniture5.8%
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U. S. Office Products Market( $ Billions )
$189 $194 $199 $206 $211
$105 $108 $113 $117 $120
$0
$50
$100
$150
$200
$250
$300
$350
2002 2003 2004 2005 2006
Retail Delivery
CAGR2002 – 2006:
3.0%
Delivery:3.4%
Retail:2.8%
$294 $302$312
$323 $331
Source: SHOPA School and Office Products Industry Report - 2007
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Office Products Customers
Consumer/Home office• Food & drug, mass retailers, super stores, specialty retailers, etc.• National catalog or internet delivery services (superstores?)Small business (1 – 20 people)• Food & drug, mass retailers, super stores, specialty retailers, etc.• National catalog or internet delivery services (superstores?)• Local or regional independent dealer• National independent dealer ?Medium/large businesses• National “power channel” (super store delivery)• Contract specialists• Large independent dealers
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U. S. Office ProductsRetail Sales Channels
• Office Super Stores (Staples, Office Depot, OfficeMax)• Mass Retailers (Wal-Mart, Target, Costco, Dollar General)• Food/Drug (Kroger, Publix, Walgreen’s, CVS)• Specialty retailers (Best Buy, Circuit City, CompUSA, CDW)• College/Bookstores (GA Tech bookstore, Follett, Barnes & Noble)• Copy/Print centers (Fedex/Kinko’s, UPS Store)• Stationary/Gift (Hallmark)• Institutional/School (School Specialty, Scholastic)• Internet/Direct (Amazon, Dell, Gateway)• Other (Ikea, The School Box, Hobby Lobby, Michaels)
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U. S. Office ProductsRetail Sales Channels
Mass Retailers28.0%
Food/Drug Stores2.6%
College/ Bookstores5.6%
Specialty Retailers31.9%
Copy/Print Services5.4%
Office Supply Superstores
9.2%
Stationary/Gift1.6%
Institutional/School Firms3.4%
Internet/Direct Sales4.6%
Other7.8%
Source: SHOPA School and Office Products Industry Report - 2007
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U. S. Office ProductsDelivery Sales Channels
• Office superstore commercial/contract divisions( Staples Business Delivery, Office Depot Business Solutions, OfficeMax, & their on-line & phone operations )
• Independent dealers ( Forms & Supply, S & T Office Products, Artlite, etc. )
• Contract specialists ( Resellers of office machines, computer systems, telecommunications, copiers, etc. )
• Contract Stationers ( Corporate Express )• Other ( Specialized office supplies to niche & vertical markets,
furniture & value-added resellers )
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Total U. S. Office Products Sales Channels
Mass Retailers17.8%
Food/Drug Stores1.6%
College/ Bookstores3.6% Specialty Stores
20.3%
Copy/Print Services3.4%
Office Supply Superstores11.1%
Stationary/Gift1.0%
Institional/School Firms2.1%
Internet/Direct Sales3.0%
Other8.7%
Independent Dealers6.3%
Contract Specialists21.0%
Source: SHOPA School and Office Products Industry Report - 2007
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- Elbert HubbardAmerican writer
1856 - 1915
“Genius may have its limitations, but stupidity is not thus handicapped.”
Food for Thought
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Office Products Manufacturers
• Some manufacturing still in the U. S.– Avery– Newell-Rubbermaid
• Many products now sourced offshore• Most manufacturers make to forecast
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Office Products Manufacturers
• Improve the sales forecast– Dealing with total demand for a product– S & OP
• Make the forecast less important– “Nimble manufacturing”
• Reduce suppliers order to delivery time• Reduce frozen period in MRP• Faster changeovers; Smaller lot sizes
• Cost reductions
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Office Products Manufacturers
“Brand owners”– Lengthening supply chain– Make to forecast; Store inventory
Care about:• Forecast accuracy• Lead times• Landed costs
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Office Products Supply Chain• Complex• Very diverse products• Differing customer delivery requirements
– Office supplies– Furniture– Size/type of customer
• Multi-level• Dual channel retailers (Staples, Office Depot) can
leverage retail and contract distribution into Mega DC’s• Delivery quality is assumed!
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Food for Thought…
“There’s no limit to how complicated things can get, on account of one thing always leading to another.”
-E. B. White“Charlotte’s Web”
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U. S. Office Products Supply Chain
Small Office Home Office
(SOHO)
Small Business(1 – 20)
Food & Drug Store
SpecialtyRetail Store
Office Super-Store Retail Retail DC
Retail DC
Retail DC
Branded Manufacturers &
Private Label
Office products wholesalers
Commercial contracts
Super store delivery
Catalog & Internet delivery
Large independent dealers
Local independent dealers
Medium/Large
Business
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Office Products Retail Supply Chain
Small Office Home Office
(SOHO)
Small Business(1 – 10)
Food & Drug Store
SpecialtyRetail Store
Office Super-Store Retail Retail DC
Retail DC
Retail DC
Branded Manufacturers &
Private Label
Office Products “Private Label”Staples• 2003: 1,000 SKUs of Staples branded items• 2007: 2,000 SKUs of Staples branded items• 2010: More than 2,000 SKUs of Staples branded items
– On average, pricing 10% to 15% below national brands
• 2012, 2013 & 2014: 28% of sales• Sourcing office in Shenzhen
0%
5%
10%
15%
20%
25%
30%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
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Office Products Retail Supply Chain
• Characterized by large volumes• Frequent store deliveries
– In-stock position at stores critical
• Scheduled deliveries– Overnight planning– Easier labor, transportation scheduling
• Few, large DC’s and cross-docks• Economies of scale
– Capital equipment– Vendors
• Focused on cost-effectiveness & accuracy• Transportation often outsourced
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Office Products Retail Supply Chain
Opportunities• Improving sales forecasting• Promotions management• Forward buying
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Office Products Retail Supply Chain
Opportunities• Improving sales forecasting• Promotions management• Forward buying• Inventory efficiency• Lead time reduction throughout supply chain• Vendor compliance criteria
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-George PlosslInventory management guru
“Forecasts are always wrong,and planners are always surprised. ”
Food for Thought
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-Winston Churchill
“Success is the ability to go from one failure to another with no loss of
enthusiasm. ”
Food for Thought
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Office Products Delivery Supply Chain
Small Business(1 – 10)
Branded Manufacturers &
Private Label
Office products wholesalers
Commercial contracts
Super store delivery
Catalog & Internet delivery
Large independent dealers
Local independent dealers
Medium/Large
Business
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Delivery Supply Chain
• Characterized by varied customer solutions– Next-day delivery from independent dealers– Desktop delivery in some cases– Same-day delivery in some cases– Varying delivery times with direct to consumer models
• Short cycle times• High product return rate (6% to 8%)
– Response to intense competition• Seasonal ?
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Delivery Supply Chain
A v e r a g e D a i l y Sa l e s ( O f f i c e P r o d u c t s )
$ 3
$ 4
$ 5
$ 6
$ 7
Jan Feb M ar Apr M ay Jun Jul Aug Sep Oct Nov Dec
2000 2001 2002 2003
$ M
illion
s
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Delivery Supply Chain
• Characterized by varied customer solutions– Next-day delivery from contract dealers– Varying delivery times with direct to consumer models– Same-day delivery in some cases– Desktop delivery in some cases
• Short cycle times• High product return rate (6% to 8%)
– Response to intense competition• Seasonal• Widely differing organizational sizes
– Number of items stocked tend to vary with company size– Smaller dealers use wholesalers more
• Little leverage with vendors• Use buying groups
• Varying business strategies• 4 to 5 lines per order, on average• Furniture often delivered separately• Dealers have multiple wholesaler relationships
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Business Capabilities
• Office superstore commercial/contract divisions– Large national contracts– Low costs– Purchasing control– Mainly standardized service
• Desktop delivery• Office Depot: “We’re not a transportation company”
• Contract specialists– In the company for reasons other than office products– Service large businesses– Can handle national accounts– Also target mid-sized businesses– Convenience purchases– Good costs
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Business Capabilities
• Medium sized independent dealers– Target mid-sized to small businesses– Still more customized service– Adequate product costs– Can handle national accounts
• American Office Products Distributors, Inc.• Wholesaler support
• Small dealers– Target small businesses– Niche markets
• Local banks, lawyers, doctors– Highly customized service– Higher costs– May be stockless
• Wholesaler support
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Business Capabilities
• Catalog and internet fulfillment– Convenience– Price– SOHO market– Service less critical– May be part of a Superstore
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Staples Delivery Supply Chain Goals
Support rapid growth and ensure excellent customer service.
• Inventory turn improvement
• Reduce the number of trips per order
• Leverage logistics expense
• Increase product margins by stocking more inventoryin our own facilities
• Driving down shrink and damages in our network
• Greater efficiency and throughput in our fulfillment centers
• Give customers more control over how Staples services them.
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Staples Delivery Supply Chain Goals
Perfect order
• Correct item(s)
• Correct quantities
• Delivered to the right place
• Delivered at the right time
• Damage free
• Right package
• Right documentation
• Correct invoice
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Office Supply Superstore U. S. and Canada DC’s
Staples:– Retail - 4– Delivery - 61
Office Depot– Retail & Delivery - 78
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Retail Cross Dock
Offices
Diverts
Technology Cage
Returns
Forward Pick & QA
Deep Reserve & Furniture
Business Solutions Delivery FulfillmentBSD Receiving Cross-Dock Receiving
BSD Shipping
Cross Dock
Shipping
Carton Induction
Floor Storage
Combined DC & Cross-dock
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Crossdock
Crossdock:• Lots of walking, walking, walking…• Potentially slower reaction to store out-of-stocks• Possibly better turns• Different product than a delivery DC• Totally different function than a delivery DC
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- Elbert HubbardAmerican writer
1856 - 1915
“One machine can do the work of fifty ordinary men. No machine can do the work of one extraordinary man.”
Food for Thought
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Office Products Delivery Supply Chain
Small Business(1 – 10)
Branded Manufacturers &
Private Label
Office products wholesalers
Commercial contracts
Super store delivery
Catalog & Internet delivery
Large independent dealers
Local independent dealers
Medium/Large
Business
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Wholesalers
National wholesalers• United Stationers
• S. P. RichardsRegional wholesalers• ActionEmco• O’HenryComputer supplies wholesalers• Ingram Micro• Tech DataFurniture wholesalers• Furniture Wholesale Group
$5.33 Bn
$1.80 Bn
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Wholesalers
• First call / Second call wholesaler relationships• Most orders electronic. Ex: Wholesaler’s orders -
– 70% EDI– 15% remote order entry– 15% phone, FAX, etc.
• Immediate stock availability response to order– Virtually no backorders– Out-of-stocks represent lost sales
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Wholesaler EDI• Probably 30 years old• Fast• Unattended (computer to computer)• Proprietary• Very efficient• Highly accurate• Multiple linkages
– Leased line– Frame relay– Internet– Dial-up– Remote order entry
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-Robert X. CringelyInfoWorld Magazine
“If the automobile had followed the same development cycle as the computer, a Rolls-Royce would today cost $100, get a million miles per gallon, and explode once a year, killing everyone inside.”
Food for Thought
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Wholesalers
• First call / Second call wholesaler relationships• Most orders electronic. Ex: Wholesaler’s orders -
– 70% EDI– 15% remote order entry– 15% phone, FAX, etc.
• Immediate stock availability response to order– Virtually no backorders– Out-of-stocks represent lost sales
• Most orders prepackaged in consumer packaging ( Wrap & Label )– From: Dealer to: Customer– Packages cross-docked at dealer– Wholesaler will drop ship direct to customers (UPS)– Product source transparent to consumer
• Few lines per wholesaler order (2, plus or minus)• Furniture usually delivered with other products
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Wholesalers
• Shortest cycle times in the industry• Must deliver to dealer in time for dealer to cross-dock
for next morning delivery• Use multiple facilities for fulfillment when needed
– Atlanta– Birmingham
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Delivery Supply Chain
• Fedex Freight linehaul– Meet enroute or at a terminal– Drop pups– Exchange pups with other tractor & driver– Return to original destination
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Delivery Supply Chain
• Fedex Freight linehaul– Meet at a half-way point– Drop pups– Exchange pups with other tractor & driver– Return to original destination
• S. P. Richards SPRinter service– Meet at a half-way point– Exchange trucks– Return to original destination (driver home
every night; truck “home” every other night)
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Wholesalers
• Shortest cycle times in the industry• Must deliver to dealer in time to cross-dock for next
morning delivery• Use multiple facilities for fulfillment when needed
– Atlanta– Birmingham
• Orders tend to arrive late in the day for same-day shipping– No opportunity to pre-plan work
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Wholesaler Order Lines by Time of Day
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Midnigh
t1:0
0 AM
2:00 A
M3:0
0 AM
4:00 A
M5:0
0 AM
6:00 A
M7:0
0 AM
8:00 A
M9:0
0 AM
10:00
AM
11:00
AM
Noon
1:00 P
M2:0
0 PM
3:00 P
M4:0
0 PM
5:00 P
M6:0
0 PM
7:00 P
M8:0
0 PM
9:00 P
M10
:00 P
M11
:00 P
M
DC 1 DC 2 DC 3
Wholesalers
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Wholesaler Cumulative Order Lines by Time of Day
Midnigh
t1:0
0 AM
2:00 A
M3:0
0 AM
4:00 A
M5:0
0 AM
6:00 A
M7:0
0 AM
8:00 A
M9:0
0 AM
10:00
AM11
:00 AM
Noon1:0
0 PM
2:00 P
M3:0
0 PM
4:00 P
M5:0
0 PM
6:00 P
M7:0
0 PM
8:00 P
M9:0
0 PM
10:00
PM11
:00 PM
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Wholesalers
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Wholesalers
• Shortest cycle times in the industry• Must deliver to dealer in time to cross-dock for next
morning delivery• Use multiple facilities for fulfillment when needed
– Atlanta– Birmingham
• Orders tend to arrive late in the day for same-day shipping– No opportunity to pre-plan work
• Deliveries:– Evening deliveries to large customers– Unattended night-time deliveries to smaller ones
• More variable product demand than dealer– Dealer out-of-stocks– No POS data
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Wholesaler Inventory Management
• Relatively low turns• Stock more SKU’s than dealers
– Items dealers don’t stock• The smaller the dealer, the fewer items they stock• Economic decision• Expand their selection
– “Purple pens”
– United – Stocks 100,000 items– S. P. Richards – Distributes more than 50,000 items
• Backup for customers during transitions ( new catalogs )• Backup for temporary out-of-stocks
– Can be huge volume– Impossible to forecast
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Wholesaler Inventory Management
• FIFO– First In First Out
• LIFO– Last In First Out
• FISH– First In Still Here
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Office Products Warehouse Technology
• Superstore delivery:– Pick-to-light
• Wholesaler:– United: Bar code scanning– S. P. Richards: Pick-to-voice
• Storage: Vertical carousels
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Checking/Packing
Start /Finish
*
ConveyorFromUpstairs(Unfinished)
Finished UPS From Upstairs
ConveyorFromUpstairs(Finished)
78
Less Critical Issues
• Transportation to dealers– Most deliveries on private fleets– Every stop every night– Routing software may not be beneficial
– Pins on a map work pretty well over time whenyou make every stop every night
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Delivery Supply ChainThe Last Mile
• Routing very important• Dynamic• Don’t go to every stop every night
• Staples• Company drivers & vehicles for 75% of orders• Deliver through crossdocks
• Office Depot:• “Increased the use of third party delivery services”• “Reduced their fleet of vehicles”
• The face of the company in the mind of the customer is the delivery person
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“A man is incapable of comprehending any argument that interferes with his revenue.”
Food for Thought
Descartes; 1650
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USA Express Program– UPS same day shipment
on orders up to 3:00 p.m.– Auto-routing by zip code– Source Complete and Quick Ship– Tracking– Non UPS-able product shipping
12% flat rate-$35 minimum charge
S. P. RichardsNationwide Distribution Support
Benefits: Expanding geographic boundaries Offense: Capture new business Defense: Maintain current business
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BRANCH USA EXP PREVIOUS INTENDED
CUT-OFF UPS PICK UP UPS PICK UP TIMES
St. Louis 3:00 PM 3:30 PM 3:30/4:00 PM
Houston 3:00 PM 4:00 PM 5:30 PM
Austin/San Antonio 3:00 PM 4:30 PM 5:15/5:30 PM
Miami 3:00 PM 5:00 PM 5:00 PM
Boston 3:00 PM 5:00 PM 5:00 PM
Columbus 3:00 PM 5:30 PM 4:30/5:30/6:00 PM
Pittsburgh 3:00 PM 5:30 PM 5:30 PM
Atlanta 3:00 PM 6:00 PM 6:00 PM
Charlotte 3:00 PM 6:00 PM 2nd driver 6:15/6:30 PM
Orlando 3:00 PM 6:00 PM 6:15/6:30 PM
Philadelphia 3:00 PM 6:00 PM 6:15/6:30 PM
Chicago 3:00 PM 6:00 PM 6:00 PM
Los Angeles 3:00 PM 6:30 PM 6:30 PM
New York 3:30 PM 7:00 PM 7:30 PM
Baltimore NONE 12:00 AM OK
UPS Pickup Times
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S. P. RichardsFurniture Program Capabilities
• In stock - overnight/next day• Express - expanded offering in 7 - 10 days*• Special Order • Drop-ship • National Delivery & Set- up* • Space Planning & Design*
* not yet available in every market
Benefit: Expand your furniture sales
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Wholesale Market
• Mature market• Limited growth• Price sensitive• Limited customer loyalty• No sustainable competitive advantage
Would you invest in this business?
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The RetailersMarket Capitalization
$6.30 $2.90
Staples Office Depot Office Max
($ Billions)
$0
$1
$2
$3
$4
$5
$6
$7
Bill
ions
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The RetailersMarket Capitalization
$10.43 $5.02
Staples Office Depot Office Max
($ Billions)
$0
$2
$4
$6
$8
$10
$12
Bill
ions
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Musings
Supply Chain:
• The network of retailers, distributors, transporters, storage facilities and suppliers that participate in the sale, delivery and production of a particular product.
• A supply chain, logistics network, or supply network is a coordinated system of entities, activities, information and resources involved in moving a product or service from supplier to customer. The entities of a supply chain typically consist of manufacturers, service providers, distributors, and retail outlets. Supply chain activities transform raw materials and components into a finished product. The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources.
89
Musings
Supply Chain Software:
• Manufacturing• Customer relationship management• Order processing• Forecasting• Procurement• Inventory planning/management• Other advanced planning• Transportation management• Warehouse management
90
Musings
Supply Chain:
• Collaborative forecasting• Event management• Partnering
– Everyone is partnering with everyone– Manufacturer with Staples & Artlite
• End-to-end visibility
91
Musings
Supply Chain:
• Communications– Internal– External– HR issue
• Doing things you don’t want to do– Tracking– Expediting– You just want it correct and on time
• Managing variability
92
• World class is delighting the customer• It’s often about process design and organization• Must eliminate work
– Lower costs– Reduce cycle times
Musings
93
• World class is delighting the customer• It’s often about process design and organization• Must eliminate work
– Lower costs– Reduced cycle times
• Automation where it helps meet (or anticipate) customer requirements AND it is cost effective
• Analyze an investment against an optimized process, not necessarily present state
• Make sure the solution fits the business• If you think you’re “Top tier”, even if you are, you
won’t be for long
Musings
94
“You have to continue to eat your own lunch, otherwise someone else
will do it for you”.
Food for Thought
- Lew PlattFormer ChairmanHewlett-Packard
95
• Complex office products supply chain• Very diverse products• Differing customer delivery requirements• Multi-level• Mega players operate in dual channels• Delivery quality is assumed!• Focus your supply chain on your customer’s
requirements• It’s not always about technology and automation
• Without a satisfied customer, there is nothing!
What I Told You
96
“It is difficult to get a man to understand something when his salary depends on his not understanding it.”
Food for Thought
- Upton SinclairAmerican author